Marasco & Nesselbush, LLP v. Collins

Decision Date16 July 2021
Docket NumberNo. 20-1397,20-1397
Citation6 F.4th 150
Parties MARASCO & NESSELBUSH, LLP, Plaintiff, Appellant, v. Tara COLLINS, individually and in her official capacity as Supervisory Attorney of ODAR; Carolyn Tedino, individually and in her official capacity as Regional Management Officer for the Boston Region of the Social Security Administration; Social Security Administration, by and through Andrew M. Saul, Commissioner of the Social Security Administration; Jane Doe, in her individual capacity and official capacity as an Employee of the Social Security Administration, Defendants, Appellees, Joseph P. Wilson, individually in his capacity as a former Associate at M & N and in his official capacity as Attorney Advisor for ODAR; Paul E. Dorsey, individually in his capacity as a former Associate at M & N and in his official capacity as Attorney Advisor for ODAR; Kyle E. Posey, individually in his capacity as a former Associate at M & N and in his official capacity as Attorney Advisor for Social Security Administration, Defendants.
CourtU.S. Court of Appeals — First Circuit

Timothy K. Baldwin, with whom Robert C. Corrente, Caroline R. Thibeault, and Whelan Corrente & Flanders LLP were on brief, for appellant.

Dennis Fan, with whom Ethan P. Davis, Acting Assistant Attorney General; Aaron L. Weisman, United States Attorney; Charles W. Scarborough, Attorney, Civil Division, Appellate Staff, U.S. Department of Justice; Royce Min, General Counsel, Social Security Administration; Michael J. Pelgro, Regional Chief Counsel, Social Security Administration; Timothy S. Bolen, Assistant Regional Counsel, Social Security Administration, and Amy Rigney, Attorney, Social Security Administration, were on brief for appellees.

Before Howard, Chief Judge, Lipez and Thompson, Circuit Judges.

LIPEZ, Circuit Judge.

Appellant Marasco & Nesselbush, LLP ("M & N"), a law firm, brought this action to challenge what it describes as "the Social Security Administration's byzantine and irrational rules that govern payment of attorney's fees in Social Security disability cases." The district court dismissed M & N's claims for mandamus and relief under the Administrative Procedure Act ("APA"), and it granted summary judgment for the Social Security Administration ("SSA") on M & N's equal protection and due process claims. We affirm dismissal of one APA claim, vacate dismissal of the other, and conclude that certain of the payment rules challenged by M & N are arbitrary and unenforceable. Given the availability of relief under the APA, we affirm dismissal of M & N's claim for mandamus relief and vacate the avoidable ruling on the constitutional claims.

I.

M & N is a Rhode Island law firm whose partners and associate attorneys regularly represent claimants seeking Social Security disability benefits. A detailed framework created by statute and regulations, and fleshed out in two agency manuals, specifies the procedures for obtaining benefits, including who may represent Social Security claimants and how representatives may obtain fees for work they perform for claimants. See, e.g., 42 U.S.C. § 406 ("Representation of claimants before Commissioner"); 20 C.F.R. §§ 404.1705 ("Who may be your representative"); 404.1725 ("Request for approval of a fee"); Program Operations Manual System ("POMS") § GN 03910.020 ("Qualifications for and Recognition of Representatives"); POMS § GN 03920.017 ("Payment of Representative's Fee"); Hearings, Appeals, and Litigation Law Manual ("HALLEX") § I-1-2-3 ("Representative(s) Who May Charge and Collect a Fee"). The two SSA manuals -- POMS and HALLEX -- each contain numerous provisions that guide the agency's decision-making while also informing the public of the requirements and procedures for seeking benefits.1

We describe below the primary aspects of this agency framework, as relevant to M & N's claims.

A. SSA Representation

Pursuant to regulation, as elaborated by the POMS and HALLEX manuals, only individual attorneys, and not law firms, may serve as "representatives" of claimants in agency proceedings.2 See, e.g., 20 C.F.R. § 404.1705(a) (stating that a claimant may "appoint as [his/her] representative ... any attorney in good standing who" meets certain requirements); POMS § GN 03920.001.A ("A claimant may appoint an individual, attorney or non-attorney, to represent him/her in matters before SSA."); HALLEX § I-1-1-10.E ("An organization cannot represent a claimant because SSA does not recognize entities or other organizations as representatives."). When claimants retain a representative, they must notify the SSA in writing, and the agency provides a form for that purpose -- SSA-1696, titled "Appointment of Representative."3 See POMS § GN 03905.030.A; HALLEX §§ I-1-1-10.A, I-1-2-3.A. A claimant may retain more than one representative, but separate written notices must be filed for each representative and the claimant "must specify a principal representative." HALLEX § I-1-1-10.D.

Consistent with these rules, SSA claimants who seek representation from M & N initially complete an SSA-1696 to appoint one of the firm's two partners, Joseph Marasco or Donna Nesselbush, as both their "representative" and their "main representative." Subsequently, when an associate is assigned to assist with a case, the client completes a new SSA-1696 to appoint the associate as an additional representative, with the M & N partner assigned to the case identified on the associate's form as the main representative.

B. Attorney's Fees for SSA Representation

By statute, attorneys who successfully represent Social Security disability claimants are entitled to a "reasonable fee" for their services. See 42 U.S.C. § 406(a)(1). In some circumstances, attorneys also are eligible for fees despite the SSA's rejection of their clients' benefits claims. See 20 C.F.R. § 404.1725(b)(2) ; see also Gisbrecht v. Barnhart, 535 U.S. 789, 794-95, 122 S.Ct. 1817, 152 L.Ed.2d 996 (2002) (noting the fees mandate for favorable determinations and the regulatory provision permitting fees "if the benefits claimant was unsuccessful"). With exceptions not relevant here, attorneys are required to obtain SSA authorization to collect fees for their work on behalf of claimants in agency proceedings. See 42 U.S.C. § 406(a)(1) (stating that the Commissioner of Social Security shall "fix ... a reasonable fee to compensate" attorneys for representing claimants who are awarded benefits); 20 C.F.R. § 404.1720(b)(1) (stating that a "representative must file a written request with [the SSA] before he or she may charge or receive a fee for his or her services").

If attorneys serving as representatives follow prescribed procedures, the SSA will directly pay at least a portion of the authorized fees from funds it withholds for that purpose from claimants' past-due benefits. See 42 U.S.C. § 406(a)(4) (providing for certification of an attorney's fee from a claimant's past-due benefits); 20 C.F.R. § 404.1720(b)(4) (stating that, subject to requirements specified elsewhere, the agency "will pay the authorized fee, or a part of the authorized fee, directly to the attorney ... out of the past-due benefits"). Pursuant to statute, the maximum amount of fees that the SSA may pay from withheld funds is 25 percent of the past-due benefits. 42 U.S.C. § 406(a)(4).4 The procedures challenged by M & N primarily concern the payments drawn from the withheld past-due benefits.

Particularly significant in this case is the rule that "[o]nly the claimant's duly appointed representative(s) may charge or collect a fee for services he or she provided in a matter before the Social Security Administration (SSA)." HALLEX § I-1-2-3.A. Because the SSA's rules allow only individuals to serve as representatives, the agency pays fees from claimants' past-due benefits only to individual attorneys. See POMS § GN 03910.042.A.3 ("NOTE: SSA recognizes and pays fees directly only to individual representatives, not entities."). The agency applies that limitation even when it recognizes that the fees at issue will be transferred to the representing attorneys' employers -- i.e., their law firms -- because the individual attorneys have been paid for their SSA work as part of their regular salaries. See, e.g., HALLEX § I-1-2-3.A ("If a law firm or other entity is involved, only the duly appointed individual(s) in that firm or entity may file a fee agreement or petition and receive fee authorization and payment for services performed."); POMS § GN 03910.042.A.3 (providing for the registration of "[a] firm or other entity" that employs a representative).

The SSA's awareness of a law firm's ultimate entitlement to the fees is reflected in the agency's reporting to the Internal Revenue Service. When the proper documents have been filed with the SSA, the law firm will be sent a 1099-MISC form "indicating the amount of any fees paid directly to their employees," POMS § GN 03913.001.D.1, and the individual attorney who received the payments will be provided "an informational Form 1099-MISC that reflects a representative's income passed to the firm," Defendants' Response to Plaintiff's Statement of Undisputed Facts, at ¶ 24, Dkt. 47, No. 1:17-cv-00317-JJM-LDA (May 30, 2019). Indeed, the SSA "recommend[s] that firms and organizations employing individual representatives register with [SSA], even though [SSA] do[es] not pay fees directly to firms and organizations." POMS § GN 03913.001.D.1.

Pursuant to statute and regulation, the SSA provides two methods for attorneys to seek fees: fee agreements made between the attorneys and their clients, and fee petitions. See POMS §§ GN 03920.001, 03920.017; 03905.035.B. The procedures differ in multiple ways. For example, a fee agreement must be submitted to the SSA before the agency reaches a benefits determination, and the agreed-upon fee is payable only if the claimant is successful. See 42 U.S.C. § 406(a)(2)(A). By contrast, a fee petition is submitted to the SSA after the attorney completes his or her...

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